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Report: Ads on Netflix “strategically pertinent”

July 26, 2019

Netflix fell short of its quarterly membership target, with subscribers increasing by 2.7 million last week, rather than the five million forecasted – which led to a 11 per cent drop in its market capitalisation.

The streaming service also lost subscribers in the US – its core domestic market, down from 60.2 million to 60.1 million, highlighting the tech major’s growing struggles to both expand and retain is subscriber base. MIDiA Research’s latest video report, Netflix After Q2 2019: Post Peak or Strategic Reset, examines the challenges mounting against Netflix and how it can address them to regain momentum.

The report highlights that Netflix needs to recalibrate both its engagement and its revenue mix to win over the next 150 million. In the era of stalling membership growth, the previously unthinkable becomes thinkable, and advertising becomes strategically pertinent.

With the negative frontline numbers looming, Netflix took the unprecedented step of publicising streaming numbers for its global hit show Stranger Things 3, which garnered 10.1 million viewers per episode.

The streaming giant expects Stranger Things fandom to be a driver of renewed subscriber growth in Q3, but Netflix has its work cut out to return to growth, especially with the imminent launches of well-funded direct-to-consumer propositions from Q3 2019 onwards.

Key takeaways from the report:

– With Netflix paying subscribers 6 per cent more likely than the average consumer to pay attention to brands that sponsor shows, than those that just have ads, Netflix is currently sitting on found revenue if it proceeds with its gate keeper strategy

– Netflix could be the right digital platform to integrate dynamic product placement, which would provide non-intrusive ad revenue for the streaming service and provide brands with access to the 26 per cent of Netflix’s valuable paywalled subscriber base who respond favourably to relevant ads

– Growth is slowing in digitally saturated Western markets and emerging markets represent the next big growth phase, but a sophisticated and pragmatic approach to content strategy will be required to ensure return on investment.

The full report can be viewed here.

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